Burma Comes in From the Cold

By Brijesh Khemlani for RUSI.org

During his historic visit to Burma in April - the first ever by a serving British leader -  David Cameron minced no words when he called for the suspension of sanctions Coming only a few weeks after the victory of democracy icon and opposition National League for Democracy (NLD) leader Aung San Suu Kyi in the 1 April by-elections, the visit reinforces the growing interest of the West in engaging the quasi-civilian administration of President Thein Sein who has surprised many observers with a series of political and economic reforms over the past year. Ruled by a brutal and secretive military junta until general elections in 2010, Burma was globally viewed as a hermit kingdom plagued with political repression and endemic ethnic separatism. Also crippled by Western sanctions and economic mismanagement, the country has largely been cut off from the economic renaissance in Southeast Asia. However that scenario may stand to change if recent developments are any indicator.

In recent months, the Thein Sein administration has released hundreds of political prisoners, signed ceasefire deals with warring ethnic rebel groups, and allowed Suu Kyi and the NLD to compete in the by-elections. Amidst increasing political openness, the country has invited more foreign investment to tap opportunities. With abundant natural resources, youthful population and a strategic position on the crossroads of rising economic behemoths India and China, the International Monetary Fund predicts that Burma may emerge as the next 'economic frontier in Asia.' While the reforms have the potential to generate immense national political and economic windfalls for Burma, the regional implications of these developments are already beginning to take shape. The Burmese opening has steered both political and economic shifts in the region, including a change in gear in Burma's ties with China, its traditional political and economic patron, as well as new political and economic opportunities for the Association of Southeast Asian Nations (ASEAN).

The Chinese Shadow

Historically, Sino-Burmese relations were marked by distrust over Beijing's political and material support to the Communist Party of Burma. Relations improved after China ceased its support to the communists in the mid-1980s. Sino-Burmese ties received a major boost following the 1988 military crackdown on pro-democracy protestors that invited widespread international condemnation. Shackled by Western sanctions and international isolation, Naypyidaw was forced to rely on China for diplomatic support, economic investment and military aid. In the last two decades, Burma's dependence on China deepened as Beijing became its main political and economic benefactor. China vetoed a UN Security Council resolution condemning Burma for human rights violations during a military-led crackdown on anti-government protestors in 2007. In 2011, Sino-Burmese bilateral trade touched $3.6 billion, cementing Beijing's status as Burma's largest trading partner. China has enormous interests in the stability of Burma amidst increasing strategic investments in the country.

Beijing views Burma as an alternative shipping route to the Indian Ocean and a major source for natural resources to power the Chinese economy. The Asian giant is involved in the construction of several major infrastructure projects in Burma, including ports, railroads and oil pipelines. Some of the projects that have raised eyebrows include the construction of the strategic deep-sea Kyaukpyu Port on the Arakan coast and the Shwe pipeline that will deliver oil and gas to China's Yunnan province. In addition, a deep underwater crude oil unloading port and oil storage facility is being constructed at Maday Island (Arakan Coast) to serve as terminus for the tankers coming from West Asia and Africa. Such energy infrastructure will allow China to bypass the congested and pirate-infested Straits of Malacca and cut substantial shipping distance.

Despite Burma's major dependence on Chinese political and economic support, there is widespread unease over the growing influence of Beijing in the country A fiercely independent country with a history with anti-colonial activism, Naypyidaw signaled its intentions when it suspended the construction of the Chinese-funded Myitsone hydroelectric dam due to growing public outcry and environmental concerns in September 2011. The suspension of the dam coincided with the reform process aimed at enticing major Western powers and other immediate neighbours in a bid to move out of the looming Chinese shadow. Led by US Secretary of State Hillary Clinton's path-breaking visit to Burma in December 2011, the US and other Western powers have responded by more than acknowledging Burma's overtures.  In addition to grabbing a slice of the lucrative Burmese economic pie, Western powers also seek to reduce Chinese sway in the region, complementing Naypyidaw's foreign policy shift. Opportunistically, the reforms also come amidst the US' strategic pivot to the Asia-Pacific. The softening American stance towards Burma is consistent with US goals to reassert its presence and influence in the region.

Yet Naypyidaw realises that it cannot afford to alienate its giant neighbour. China's permanent seat on the UN Security Council and its immense economic clout makes it an indispensible partner for Burma. Thus it should be noted that Thein Sein  signed a strategic partnership with China in his first state visit to Beijing in May 2011. The visit also included discussions on possible berthing of Chinese naval vessels in Burmese ports in the Bay of Bengal, allowing Beijing to protect its Burma-based oil and gas facilities and expand its presence in the Indian Ocean. The key long-term priority for Naypyidaw would be to effectively manage its traditional ties with China amidst greater engagement with other powers - a delicate balancing act requiring all the diplomatic skill and finesse of Burma's leaders.

Tango With ASEAN

Burma's belated reforms have come as a massive boost to ASEAN. The regional grouping, which has always insisted on a constructive engagement with Burma, stands vindicated by recent developments in the country. The regional grouping has extended overwhelming support to the reforms and awarded Burma with the rotating regional chairmanship of the grouping in 2014.  Once on the fringes of the region, Naypyidaw's reemergence on the regional and global stage comes at a critical time for ASEAN with both political and economic implications for the region. Firstly, ASEAN stands to receive renewed political confidence amidst long-standing criticism of being a regional talking-shop that has accomplished little of substance. Regional powers have hailed their decades-old policy of quietly nudging Naypyidaw towards democratic reforms as paying dividends, central to ASEAN's long-standing non-interference mantra. This endorsement of the 'ASEAN Way' comes at a critical juncture as the region grapples with major challenges such as increasing tensions with China over the South China Sea and the US' realignment to the region.

Secondly, Naypyidaw's reforms provide a further boost to ASEAN's goal of establishing the ASEAN Economic Community by 2015. The ASEAN Economic Community aims to establish regional economic integration by encouraging free movement of goods, services, investment, skilled labour, and capital. Burma's abundance of natural resources benefits the region in terms of sourcing for raw materials. Naypyidaw also stands to gain from the eventual return of skilled Burmese expatriates forced to leave the country due to political repression and lack of economic opportunities.

Major ASEAN corporations have already started betting on the massive economic potential of this last economic frontier. Thailand's Italian-Thai Development Co. has embarked on an ambitious project to build a $50 billion deep-sea port and industrial estate in Burma's sleepy Dawei village. The special economic zone, one of the largest in the region, promises to be a new transportation corridor linking India, the Middle East and Europe with Southeast and East Asia, replacing the Straits of Malacca. An ASEAN business delegation, comprising thirty regional business leaders, also visited Rangoon to explore economic opportunities in February 2012.

Notwithstanding the much-needed political and economic victory for the regional grouping, ASEAN must continue to encourage Naypyidaw to implement more reforms to put it on a firmer path to democracy and openness. This would mean fostering trust and dialogue with not only the government but also key stakeholders in the military. Burma's sudden course shift is likely to rattle military hardliners, who are traditionally used to calling the shots in the country. For ASEAN, sustaining the Burmese opening may be one of its biggest challenges in the current decade.